Happy Bobby Bonilla Day!
Bobby Bonilla is 59 years old and hasn't played major league baseball since 2001. But the Mets will pay Bonilla $1.2 million today in the latest installment of what many consider one of the worst deals in sports history.
The deal is so infamous that July 1 is now known in the sports world as "Bobby Bonilla Day."
Following the 1999 season, the Mets wanted to buy out the final year of Bonilla's contract. But instead of paying him the $5.9 million he was owed, the two sides agreed to a deferred compensation deal with the Mets paying Bonilla 25 annual payments of $1.2 million starting on July 1, 2011.
On the surface, the payments look laughable for the Mets as they will total $29.8 million. However, it is not nearly that simple, and the deal was actually a good one for the Mets.
Or at least it could have been.
If Bonilla had accepted the $5.9 million in 2000 and invested the entire amount at 8% interest, the original investment would have grown to $104.1 million by 2035* (blue line in the chart below). However, if Bonilla took his annual payment and invested it with an 8% return, he would have $95.2 million by 2035 (orange line in the chart below).
In other words, Bonilla lost nearly $10 million in potential earnings by taking the payments instead of the lump sum. Anybody who plays the lottery knows the best deal is the lump-sum payment.
But more importantly for the Mets, if they invested the $5.9 million at 8% interest in 2000, that money would have grown to more than $14 million before they had to make a single payment to Bonilla. That money would continue to draw interest even while they are making payments.
By 2035, the Mets would still have $8.9 million left over (red line in the chart below).
Of course, this assumes that both sides would have invested the money wisely and, considering the Mets' history, that is certainly questionable. And as others have noted, the money saved in 1999 likely helped the Mets win the National League in 2000.
But the deal itself was smart, and if the money were invested wisely, the Mets would have profited from Bonilla's generosity, and the contract wasn't so dumb after all.
* These amounts do not consider taxes that would have to be paid.
This story was originally published in 2013 and has been updated.
